NOT E S TO CON SOLI DATED FI NA NCI A L STATEME NT S DE C EM BE R 3 1 , 201 3 A ND 201 2 (Dollars In Thousands Unless Otherwise Noted)
16
Balances consist of the following as of December 31: 2012
2013
Land Buildings and improvements Home security package systems Furniture and fixtures Vehicles and equipment Construction-in-progress
Less accumulated depreciation
200 4,277 30,259 4,939 20,340 24
$
60,039 (37,845)
54,539 (35,244)
$
$22,194
200 3,980 26,989 4,321 19,036 13
$19,295
Revenue Recognition Vector’s major sources of revenue are equipment sales, installation, monitoring and managed network services as described below. While Vector frequently sells these elements in a bundled arrangement, it also sells each element individually, with no discounts given for the elements included in a bundled arrangement. Accordingly, when elements are included in a bundled arrangement, each element is treated as a separate unit of accounting. The revenue recognition policy with respect to each of the three major elements is as follows:
• Installation and equipment revenue - Recognized as services are performed on a percentage-of-completion basis calculated on a cost-to-cost comparison. • Service revenue - Recognized as services are performed for time and material agreements and recognized ratably over the service period for those agreements entered into under a fixed fee arrangement. • Monitoring and managed network revenue - Recognized ratably over the service period with amounts billed in advance of service delivery deferred and amortized over the applicable period of service. Vector’s overall arrangement fee for bundled arrangements is allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by vendor-specific objective evidence or third-party evidence or are based on the entity’s estimated selling price. Application of the “residual method” of allocating an overall arrangement fee between delivered and undelivered elements is not permitted. Inventories Inventories, consisting primarily of security equipment, are stated at the lower of average cost or market. Intangible Assets In accordance with ASC Topic 350, Intangibles – Goodwill and Other, as of January 1, 2013 goodwill is amortized over ten years and tested when a triggering event occurs. A triggering event draws into question whether the fair value of the entity may be below its carrying amount.
In accordance with Impairment or Disposal of Long-Lived Assets subsections of ASC Subtopic 360-10, Property, Plant, and Equipment – Overall, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares the undiscounted future cash flows of that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset